Annual report pursuant to Section 13 and 15(d)

SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES (Tables)

v2.4.1.9
SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES (Tables)
12 Months Ended
Dec. 31, 2014
Segment Reporting [Abstract]  
Schedule of segment reporting
Summary financial data on Newcastle’s segments is given below, together with reconciliation to the same data for Newcastle as a whole:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Investments (A)
 
 
 
 
 
 
 
 
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Discontinued Operations
 
Eliminations
 
Total
Year Ended December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
84,938

 
$
50,093

 
$
147

 
$
44

 
$
—

 
$
(7,595
)
 
$
127,627

Interest expense
(22,142
)
 
(41,874
)
 
(19,783
)
 
(3,818
)
 
—

 
7,595

 
(80,022
)
Inter-segment elimination
(7,595
)
 
1,861

 
5,734

 
—

 
—

 
—

 
—

Net interest income (expense)
55,201

 
10,080

 
(13,902
)
 
(3,774
)
 
—

 
—

 
47,605

Impairment (reversal)
(3,303
)
 
884

 
—

 
—

 
—

 
—

 
(2,419
)
Operating revenues
—

 
—

 
291,537

 
—

 
—

 
—

 
291,537

Other income
41,780

 
26,819

 
5,863

 
—

 
—

 
—

 
74,462

Loan and security servicing expense
238

 
961

 
—

 
—

 
—

 
—

 
1,199

Operating expenses - golf (C)
—

 
—

 
244,234

 
—

 
—

 
—

 
244,234

Repairs and maintenance expenses - golf
—

 
—

 
9,870

 
—

 
—

 
—

 
9,870

Cost of sales - golf
—

 
—

 
30,271

 
—

 
—

 
—

 
30,271

General and administrative expense
14

 
2

 
1,435

 
7,722

 
—

 
—

 
9,173

Acquisition and transaction expenses (D)
—

 
2,919

 
1,941

 
619

 
—

 
—

 
5,479

Management fee to affiliate
—

 
—

 
—

 
21,039

 
—

 
—

 
21,039

Depreciation and amortization
—

 
—

 
26,880

 
87

 
—

 
—

 
26,967

Income tax expense
—

 
—

 
208

 
—

 
—

 
—

 
208

Income (loss) from continuing operations
100,032

 
32,133

 
(31,341
)
 
(33,241
)
 
—

 
—

 
67,583

Loss from discontinued operations, net of tax
—

 
—

 
—

 
—

 
(35,189
)
 
—

 
(35,189
)
Net income (loss)
100,032

 
32,133

 
(31,341
)
 
(33,241
)
 
(35,189
)
 
—

 
32,394

Preferred dividends
—

 
—

 
—

 
(5,580
)
 
—

 
—

 
(5,580
)
Net loss attributable to noncontrolling interests
—

 
—

 
329

 
—

 
523

 
—

 
852

Income (loss) applicable to common stockholders
$
100,032

 
$
32,133

 
$
(31,012
)
 
$
(38,821
)
 
$
(34,666
)
 
$
—

 
$
27,666

 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, net (E)
$
473,209

 
$
833,293

 
$
323,969

 
$
—

 
$
—

 
$
—

 
$
1,630,471

Cash and restricted cash
11,790

 
877

 
21,637

 
55,137

 
—

 
—

 
89,441

Other assets
1,927

 
2,190

 
31,366

 
91

 
—

 
—

 
35,574

Assets of discontinued operations
—

 
—

 
—

 
—

 
6,803

 
—

 
6,803

Total assets
486,926

 
836,360

 
376,972

 
55,228

 
6,803

 
—

 
1,762,289

Debt, net (E)
310,636

 
791,499

 
161,857

 
51,231

 
—

 
—

 
1,315,223

Other liabilities
2,391

 
4,528

 
164,897

 
16,475

 
—

 
—

 
188,291

Liabilities of discontinued operations
—

 
—

 
—

 
—

 
447

 
—

 
447

Total liabilities
313,027

 
796,027

 
326,754

 
67,706

 
447

 
—

 
1,503,961

Preferred stock
—

 
—

 
—

 
61,583

 
—

 
—

 
61,583

Noncontrolling interests
—

 
—

 
36

 
—

 
—

 
—

 
36

Equity attributable to common stockholders
$
173,899

 
$
40,333

 
$
50,182

 
$
(74,061
)
 
$
6,356

 
$
—

 
$
196,709


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Investments (A)
 
 
 
 
 
 
 
 
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Discontinued Operations
 
Eliminations
 
Total
Year Ended December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
119,292

 
$
98,968

 
$
—

 
$
198

 
$
—

 
$
(4,746
)
 
$
213,712

Interest expense
(24,996
)
 
(54,534
)
 
 
 
(3,817
)
 
 
 
4,746

 
(78,601
)
Inter-segment elimination
(4,746
)
 
4,746

 
—

 
—

 
—

 
—

 
—

Net interest income (expense)
89,550

 
49,180

 
—

 
(3,619
)
 
—

 
—

 
135,111

Impairment (reversal)
(9,338
)
 
(10,431
)
 
—

 
—

 
—

 
—

 
(19,769
)
Other income, net
23,946

 
11,344

 
—

 
—

 
—

 
—

 
35,290

Loan and security servicing expense
741

 
3,113

 
—

 
3

 
—

 
—

 
3,857

General and administrative expense
—

 
18

 
—

 
17,440

 
—

 
—

 
17,458

Management fee to affiliate
—

 
—

 
—

 
28,057

 
—

 
—

 
28,057

Depreciation and amortization
—

 
—

 
—

 
4

 
—

 
—

 
4

Income (loss) from continuing operations
122,093

 
67,824

 
—

 
(49,123
)
 
—

 
—

 
140,794

Income from discontinued operations, net of tax
—

 
—

 
—

 
—

 
11,547

 
—

 
11,547

Net income (loss)
122,093

 
67,824

 
—

 
(49,123
)
 
11,547

 
—

 
152,341

Preferred dividends
—

 
—

 
—

 
(5,580
)
 
—

 
—

 
(5,580
)
Net income attributable to noncontrolling interests
—

 
—

 
—

 
—

 
(928
)
 
—

 
(928
)
Income (loss) applicable to common stockholders
$
122,093

 
$
67,824

 
$
—

 
$
(54,703
)
 
$
10,619

 
$
—

 
$
145,833

 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments, net (E)
$
838,162

 
$
1,272,952

 
$
345,755

 
$
—

 
$
—

 
$
—

 
$
2,456,869

Cash and restricted cash
2,377

 
—

 
22,890

 
23,310

 
—

 
—

 
48,577

Other assets
47,130

 
3,395

 
32,654

 
987

 
 
 
—

 
84,166

Assets of discontinued operations
—

 
—

 
—

 
—

 
2,248,023

 
—

 
2,248,023

Total assets
887,669

 
1,276,347

 
401,299

 
24,297

 
2,248,023

 
—

 
4,837,635

Debt, net (E)
645,938

 
1,091,430

 
152,498

 
51,237

 
—

 
—

 
1,941,103

Other liabilities
19,194

 
1,669

 
170,623

 
44,528

 
 
 
—

 
236,014

Liabilities of discontinued operations
—

 
—

 
—

 
—

 
1,434,394

 
—

 
1,434,394

Total liabilities
665,132

 
1,093,099

 
323,121

 
95,765

 
1,434,394

 
—

 
3,611,511

Preferred stock
—

 
—

 
—

 
61,583

 
—

 
—

 
61,583

Noncontrolling interest
—

 
—

 
366

 
—

 
60,913

 
—

 
61,279

Equity attributable to common stockholders
$
222,537

 
$
183,248

 
$
77,812

 
$
(133,051
)
 
$
752,716

 
$
—

 
$
1,103,262


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Investments (A)
 
 
 
 
 
 
 
 
 
 
 
CDOs
 
Other Debt (B)
 
Golf
 
Corporate
 
Discontinued Operations
 
Eliminations (D)
 
Total
Year Ended December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
197,007

 
$
91,818

 
$
—

 
$
170

 
$
—

 
$
(6,044
)
 
$
282,951

Interest expense
(56,767
)
 
(53,700
)
 
—

 
(3,813
)
 
—

 
6,044

 
(108,236
)
Inter-segment elimination
(6,044
)
 
6,044

 
—

 
—

 
—

 
—

 
—

Net interest income (expense)
134,196

 
44,162

 
—

 
(3,643
)
 
—

 
—

 
174,715

Impairment (reversal)
(7,381
)
 
1,717

 
—

 
—

 
—

 
—

 
(5,664
)
Other income, net
260,025

 
2,351

 
—

 
—

 
—

 
—

 
262,376

Loan and security servicing expense
916

 
3,344

 
—

 
—

 
—

 
—

 
4,260

General and administrative expense
—

 
4

 
—

 
11,235

 
—

 
—

 
11,239

Management fee to affiliate
—

 
—

 
—

 
23,611

 
—

 
—

 
23,611

Depreciation and amortization
—

 
—

 
—

 
—

 
—

 
—

 
—

Income (loss) from continuing operations
400,686

 
41,448

 
—

 
(38,489
)
 
 
 
—

 
403,645

Income from discontinued operations, net of tax
—

 
—

 
—

 
—

 
30,465

 
—

 
30,465

Net income (loss)
400,686

 
41,448

 
—

 
(38,489
)
 
30,465

 
—

 
434,110

Preferred dividends
—

 
—

 
—

 
(5,580
)
 
—

 
—

 
(5,580
)
Income (loss) applicable to common stockholders
$
400,686

 
$
41,448

 
$
—

 
$
(44,069
)
 
$
30,465

 
$
—

 
$
428,530


(A)
Assets held within non-recourse structures, including all of the assets in the CDO segment, are not available to satisfy obligations outside of such financings, except to the extent net cash flow distributions are received from such structures. Furthermore, creditors or beneficial interest holders of these structures generally have no recourse to the general credit of Newcastle. Therefore, the exposure to the economic losses from such structures generally is limited to invested equity in them and economically their book value cannot be less than zero. Therefore, impairment recorded in excess of Newcastle’s investment, which results in negative GAAP book value for a given non-recourse financing structure, cannot economically be incurred and will eventually be reversed through amortization, sales at gains, or as gains at the deconsolidation or termination of such non-recourse financing structure.
(B)
The following table summarizes the investments and debt in the other debt segment:

 
December 31, 2014
 
December 31, 2013
 
Investments
 
Debt
 
Investments
 
Debt
Non-Recourse
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
Manufactured housing loan portfolio I
$
—

 
$
—

 
$
—

 
$
—

 
$
102,681

 
$
91,924

 
$
53,753

 
$
50,424

Manufactured housing loan portfolio II
—

 
—

 
—

 
—

 
128,975

 
128,117

 
93,863

 
93,536

Subprime mortgage loans subject to call options
406,217

 
406,217

 
406,217

 
406,217

 
406,217

 
406,217

 
406,217

 
406,217

Real estate securities
—

 
—

 
—

 
—

 
56,466

 
50,961

 
—

 
—

Subtotal
406,217

 
406,217

 
406,217

 
406,217

 
694,339

 
677,219

 
553,833

 
550,177

Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unlevered real estate securities
167,457

 
12,265

 
—

 
—

 
129,563

 
4,296

 
—

 
—

Levered real estate securities
390,771

 
407,689

 
385,282

 
385,282

 
514,994

 
551,270

 
516,134

 
516,134

Other Investments
N/A

 
6,479

 
—

 
—

 
N/A

 
6,160

 
—

 
—

Residential mortgage loans
934

 
643

 
—

 
—

 
45,323

 
34,007

 
25,119

 
25,119

 
$
965,379

 
$
833,293

 
$
791,499

 
$
791,499

 
$
1,384,219

 
$
1,272,952

 
$
1,095,086

 
$
1,091,430



(C)
Operating expenses-golf includes rental expenses recorded under operating leases for carts and equipment in the amount of $5.0 million for the year ended December 31, 2014.
(D)
Includes all transaction related and spin-off related expenses.
(E)
Net of $35.1 million and $87.7 million of inter-segment eliminations as of December 31, 2014 and 2013, respectively.

 
Schedule of other debt segment investments and debt
The following table summarizes the investments and debt in the other debt segment:

 
December 31, 2014
 
December 31, 2013
 
Investments
 
Debt
 
Investments
 
Debt
Non-Recourse
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
 
Outstanding
Face Amount
 
Carrying
Value
Manufactured housing loan portfolio I
$
—

 
$
—

 
$
—

 
$
—

 
$
102,681

 
$
91,924

 
$
53,753

 
$
50,424

Manufactured housing loan portfolio II
—

 
—

 
—

 
—

 
128,975

 
128,117

 
93,863

 
93,536

Subprime mortgage loans subject to call options
406,217

 
406,217

 
406,217

 
406,217

 
406,217

 
406,217

 
406,217

 
406,217

Real estate securities
—

 
—

 
—

 
—

 
56,466

 
50,961

 
0

 
0

Subtotal
406,217

 
406,217

 
406,217

 
406,217

 
694,339

 
677,219

 
553,833

 
550,177

Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unlevered real estate securities
167,457

 
12,265

 
—

 
—

 
129,563

 
4,296

 
—

 
—

Levered real estate securities
390,771

 
407,689

 
385,282

 
385,282

 
514,994

 
551,270

 
516,134

 
516,134

Other Investments
N/A

 
6,479

 
—

 
—

 
N/A

 
6,160

 
—

 
—

Residential mortgage loans
934

 
643

 
—

 
—

 
45,323

 
34,007

 
25,119

 
25,119

 
$
965,379

 
$
833,293

 
$
791,499

 
$
791,499

 
$
1,384,219

 
$
1,272,952

 
$
1,095,086

 
$
1,091,430

Schedule of holdings in variable interest entities
Newcastle had variable interests in the following unconsolidated VIEs at December 31, 2014, in addition to the subprime securitizations which are described in Note 6:
Entity
 
Gross Assets (A)
 
Debt (B)
 
Carrying Value of Newcastle’s
Investment (C)
Newcastle CDO V
 
$
121,497

 
$
149,402

 
$
7,956


(A)
Face amount.
(B)
Newcastle CDO V includes $41.8 million face amount of debt owned by Newcastle with a carrying value of $8.0 million at December 31, 2014.
(C)
This amount represents Newcastle’s maximum exposure to loss from this entity.